Brussels - The European Union's executive on Tuesday approved German plans to prop up IKB and NordLB, two of the banks worst hit by the current financial crisis.

The German plan to guarantee the two banks' business is "necessary to avoid a serious disturbance in the German economy", but makes sure that the two banks will not benefit from an unfair commercial advantage, the European Commission said in a statement.

Under the German scheme, IKB benefits from a state guarantee covering up to 5 billion euros' (7 billion dollars') worth of debt in a bid to make sure that the bank can continue to refinance its business in the midst of the global credit crunch.

NordLB, which was also hit hard by the worldwide freezing up of credit markets, receives a state guarantee which is to run for up to five years and is backed by a "very good, diversified guarantee pool of assets," the commission statement said.

The commission is tasked with making sure that member states do not break the bloc's strict rules on fair competition when they move to prop up key businesses or industries. (dpa)